Citgo to Settle New Hampshire Gas-Additive Lawsuit

Jan. 28 (Bloomberg) -- New Hampshire shouldn’t have had to
trade water quality for cleaner air, a former state official
told a jury in a trial over whether ExxonMobil Corp.
contaminated the state’s groundwater with a gasoline additive.

Kent Colburn, the former director of the air resources
division of New Hampshire’s Department of Environmental
Services, testified in state court in Concord today that it
wouldn’t have participated in a federal clean-air program called
Reformulated Gasoline, or RFG, if Exxon had warned of the risks
of the additive, methyl tertiary butyl ether, or MTBE. The trial
began Jan. 14.

“DES was not in the business of transferring pollution
from one medium to another,” said Colburn, who served from 1995
to 2002. Although the RFG program “created numerous health
benefits,” MTBE wasn’t the reason for the air quality
improvement, he said. Former DES commissioner Robert Varney
testified last week that he was “shocked” to learn Exxon was
aware of MTBE’s risks before adding it to gasoline sold in the
state.

New Hampshire could be seeking more than $200 million from
ExxonMobil, the last defendant on trial in the $816 million
lawsuit filed in 2003. This is one of scores of cases involving
MTBE filed since 2000 against refiners, fuel distributors and
chemical makers.

Groundwater Risk

Robert Larkins, a former vice president of marketing for
Exxon in the 1980s, said in taped testimony played in court last
week that he approved the use of MTBE despite a colleague’s
recommendation in a mid-1980s memo against using it because of
its risk to groundwater. The colleague had been asked by
ExxonMobil to conduct a study of MTBE.

“She did not say that you cannot or should not put it in
there,” Larkins said, referring to the memo. “She said there
were some concerns and she recommended against it.”

ExxonMobil has argued that it was complying with federal
regulations that pre-empt state law. They said MTBE was added to
gasoline to make it burn more thoroughly and thus reduce air
pollution, as required under the 1990 Clean Air Act.

James Quinn, a lawyer for the company, said that the state
was aware of the risks of MTBE when it opted into the RFG
program in 1991 because there had been documents and data about
the additive for several years. New Hampshire decided to
re-enter the clean-air program in 1997.

Cross-examining Colburn today, Quinn referred to a report
from Maine that Colburn received in 1995 that said MTBE had been
detected in groundwater for more than 10 years and that
“increased surveillance” of the chemical in water was
required.

Contaminated Wells

The state was petitioning the Environmental Protection
Agency to get out of the RFG program in 1999.

New Hampshire has said that about 40,000 wells are
contaminated with MTBE including about 5,590 at levels
determined to be unfit for drinking.

The number of contaminated wells is a factor in deciding
monetary damages if ExxonMobil is found liable. The state is
also seeking damages based on market share of gasoline sales in
New Hampshire during the period covered by the lawsuit.

ExxonMobil’s share was about 30 percent, the state said.
Based on an estimated cost of $816 million to test for, monitor
and clean up the groundwater, New Hampshire could be seeking
about $245 million from the company.

Settlement Talks

New Hampshire Superior Court Judge Peter Fauver agreed
Jan. 15 to sever the other defendant in this trial, Citgo
Petroleum Corp., while the company and the state work to
complete a settlement. Citgo is the Houston-based unit of
Petroleos de Venezuela SA, the country’s state-owned oil
company.

Citgo’s market share ranged from 3.1 percent to 8.7
percent, New Hampshire said. Based on those figures, the state
could be seeking $25 million to $71 million from Citgo. If an
accord isn’t reached by Feb. 15 and no extension is approved,
Citgo would be reinstated to the trial.

Besides ExxonMobil and Citgo, New Hampshire also sued Shell
Oil Co., Sunoco Inc., ConocoPhillips, Irving Oil Ltd., Vitol SA
and Hess Corp. All settled before the trial began except
ExxonMobil and Citgo. Shell and Sunoco agreed to pay New
Hampshire $35 million in a settlement announced in November.

New Hampshire has received more than $100 million in
settlements from defendants so far, according to court papers.

Polluting Wells

MTBE lawsuits have also been consolidated in federal court
in New York for pretrial evidence-gathering and motions. In
2009, a federal jury ordered ExxonMobil to pay New York City
$104.7 million after finding it liable for polluting wells in
the city. ExxonMobil has appealed.

The additive leaked into New Hampshire’s groundwater from
spills at service stations, vehicle junkyards and storage tanks.
It can render drinking water “foul, putrid and unfit for human
consumption,” according to court filings. MTBE is no longer
added to gasoline.

The trial could last more than four months.

The case is New Hampshire v. Hess Corp., 03-C-0550, New
Hampshire Superior Court, Merrimack County (Concord).